The Kobo eReader will feature the same sort of electronic ink screen found on the Kindle and will be available through Indigo outlets in May, and in Borders stores in the United States in the summer. The eReader is priced lower than Amazon's basic device, which sells for $259 (US).

Kobo's device will come pre-loaded with 100 classic books that are in the public domain, but will not have wireless connectivity like the Kindle. Users will have to purchase their books online separately and load them onto the eReader via its USB or Bluetooth connection.

The company said it has more than two million books in its database.

Kobo is 58 per cent owned by Indigo, with minority shareholders including Borders, Australia's Red Group and Hong Kong-based Cheung Kong Holdings — which is also invested in Skype and Facebook, among other technology companies.

The company was rebranded as Kobo in December from Indigo's Shortcovers e-book division, and is aiming for a global market. In a recent interview, Kobo chief executive Michael Serbinis said the company has customers in 200 countries.

The e-reader market is becoming increasingly crowded. Sony already sells a rival device to the Kindle in Canada, and a number of electronics makers such as Samsung have versions in the works. Apple's iPad is also expected to be a contender for the burgeoning e-book market.

E-book sales in the United States alone were $55.9 million (U.S.) in the fourth quarter of 2009, up from $16.8 million a year earlier, according to the Association of American Publishers. Worldwide sales are expected to climb to $9 billion annually by 2013, according to In-Stat.

Many devices eyed

Kobo is not hooking its fortunes to just one device, Serbinis said. The company is making its "Powered by Kobo" software available to other e-reader makers to use, similar to how Google provides the Android operating system that many different manufacturers' smartphones run on.

"There are going to be hundreds of devices that people can read on, and people will realize they don't want to be locked into any one," he said.

"Making an e-reader is going to get commoditized very fast. Those guys are going to duke it out on price. That's great for the consumer, but it won't be a good business to be in. I'm happy to power anybody that wants Kobo inside, but getting into that business of thin margins and capital intensiveness is not a great business."

Kobo is also selling e-books in the open ePub format, which many e-reader makers — except for Amazon — are adopting. Serbinis, who is critical of Amazon for snubbing ePub so far, said the format has an advantage because consumers will want to be able to read their books on whatever device they want.

"They want to maintain as much lock in as possible so they're not going to go there." he said. "You're not going to want to buy a book from one retailer and one book from another and, to use a physical metaphor, keep them in separate rooms of your house. [EPub] allows you to have choice of device and store and it lets you keep your books in one place."

Amazon, however, is similarly critical of companies that are using the ePub format but then putting digital rights management copy protection on e-books, which Kobo is doing. Amazon, like Kobo, is working at making e-books available on all devices.

"EPub isn't open if you wrap DRM around it. Our approach is to make sure you can read your Kindle books on any device," said Amazon spokesperson Kinley Campbell. "We already support iPhone, iPod touch and the PC, and will have many more in the future, including Mac."

Early side-effect of market

Serbinis said DRM is an early side-effect of the market that is eventually going to go away, just as it has — for the most part — with downloadable music.

"DRM is not about stopping the hackers, it's really about enabling a business model that publishers feel comfortable with," he said. "Things like sharing aren't allowed right now, but we're going there. You can share books today, so why can't you share e-books?"

Lorraine Shanley, a principal of book industry analysis firm Market Partners International, thinks sharing and potential piracy of e-books won't become an issue if publishers keep prices low, as they generally are now.

"If you can buy a book for $10 rather than $25, sharing becomes less of an issue," she said.

Shanley also said there will be room in the market for dedicated e-book devices such as the Kindle and Kobo eReader, as well as for more expensive multipurpose gadgets such as the iPad.